The Median Level of Founder Ownership at Exit

11/03/2016By Sammy Abdullah, CFA

Founders are always concerned with their level of equity ownership and the potential dilution from a new round, and rightly so. The name of the game is to have a large exit while preserving as much equity for yourself as possible. To better understand what the typical level of founder and VC ownership is upon exit, we poured through the S1 filings of 79 publicly traded tech companies. An S1 is a prospectus required by the SEC before an IPO, so it’s full of very interesting data. The technology companies spanned various industries such as SaaS, content distributors, and social media, including companies like Apple, Facebook, Google, and Salesforce. The data and key observations are below.

*In some cases, Founder + VC ownership is more than 100% because the founder may also be invested via a separate entity and marked "VC"

-Upon exit, the median level of founder ownership across the 79 companies was 11%. The average was slightly higher at 17%, due to the very heavy ownership stakes of guys like Nick Woodman at GoPro (43%), Jay Hoag at Netflix (43%), Pierre Omidyar at eBay (42%), and Sergey Brin & Larry Page at Google (51% combined). While you want to own massive stakes like the guys above, so long as you’re at least at 11% upon exit, you’re in line with your peers.

-The median level of VC ownership upon exit was 62% and the average was 56%. In other words, to get to the IPO level, generally it takes a significant amount of outside investment so nurturing and maintaining large investor relationships is important.

-Both the median and averages of the founders and VC sum to 73% (11+62 and 17+56). That means smaller investors and employees owned 27% of these businesses at IPO. The lesson there is that small investors will be as important to your success as large investors, especially early on. Additionally, option pools are going to need to be set up along the way and sharing equity with your key employees will be critical to growing a large, IPO-worthy business.

-A number of VC pop up repeatedly in different deals. For instance, Bessemer, Sequoia, Benchmark, Greylock, DST, and Accel are each in multiple deals. There is a reason firms like these can raise billions of dollars, and it’s because of the success of the entrepreneurs they invest in.

Hopefully the data is helpful to you in framing founder ownership. Raising money is very dilutive, so preserve your equity by staying as cash efficient as possible and finding creative ways to grow.